Infosys row: Govt seeks details on wistleblower complaint to US market regulator against IT firm's management

Last week, it was reported that the market regulator Securities and Exchange Board of India (SEBI) might seek clarification from Infosys management on charges levelled by the whistleblower.

FP Staff October 29, 2019 15:35:21 IST
Infosys row: Govt seeks details on wistleblower complaint to US market regulator against IT firm's management
  • The Ministry of Corporate Affairs action comes after the complaint by a whistleblower group against Infosys CEO Salil Parekh and CFO Nilanjan Roy

  • On 26 October, three US investor rights law firms had filed a class-action lawsuit against Infosys after the complaint

  • Last week, it was reported that SEBI might seek clarification from Infosys management on charges levelled by the whistleblower

The government reportedly asked details from Information Technology major Infosys about the whistleblower's complaint to the US market regulator against the company's management, said a media report.

After a group namely 'Ethical Employees' accused CEO Salil Parekh and CFO Nilanjan Roy of indulging in unethical practices, the Ministry of Corporate Affairs (MCA) sought details on the whistleblower complaint to the US Securities and Exchange Commission (SEC) and is keeping a close watch, said a report in The Economic Times.

“This is a usual practice... Details are sought from a company in such situations,” the report said quoting an official.

Infosys row Govt seeks details on wistleblower complaint to US market regulator against IT firms management

Representational image. Reuters

In a letter, dated 20 September, and signed by 'Ethical Employees', it was alleged that Parekh as well as Roy had engaged in forced revenue recognition from large contracts without adhering to accounting standards.

The letter, addressed to the board, claimed that recent big deal wins carried negligible margins and that Roy directed certain people to make wrong assumptions to show margins.

On 26 October, three US investor rights law firms namely  Bragar Eagel & Squire, The Rosen Law Firm and Howard G Smith had filed a class-action lawsuit against Infosys after the complaint by a group of whistleblowers.

Last week, it was reported that the market regulator Securities and Exchange Board of India (SEBI) might seek clarification from Infosys management on charges levelled by the whistleblower.

SEBI could question Infosys about the company not informing the exchanges upon the receipt of whistleblower complaint dated 30 September.

The market regulator may also investigate the whistleblowers' action in order to ensure there is no vested interest involved.

On October 24, Infosys had said that US market regulator SEC had initiated a probe on the whistleblower complaints that alleged "unethical practices" by top management of the IT major to boost revenues.

"The company has been in touch with the SEC regarding the anonymous whistleblower complaints (anonymous complaints) and has learnt that the SEC has initiated an investigation into this matter. The company will cooperate with the SEC's investigation," Infosys had said in a statement.

Last week, the government had asked the National Financial Reporting Authority (NFRA) to look into alleged accounting irregularities at the IT major in the wake of whistleblower complaints.

NFRA comes under the Ministry of Corporate Affairs.

The senior government official said that NFRA had been asked to look into alleged accounting irregularities and related unethical practices, reported PTI.

NFRA, the independent regulator for the auditing profession, can take up cases on its own or on the direction of the ministry.

On 22 October, Infosys chairman Nandan Nilekani had said the company's audit committee would conduct an independent investigation on whistleblower allegations against Parekh and Roy.

The committee began consultation with independent internal auditors EY, and has retained law firm, Shardul Amarchand Mangaldas & Co. to conduct an independent investigation, Nilekani noted in his statement to the stock exchanges.

With inputs from agencies

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